
Concept explainers
a.
Compute the
a.

Explanation of Solution
Double-declining-balance method:
It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less
Compute the depreciation expense for five years, using double-declining-balance depreciation.
Date | Double-Declining-Balance Depreciation Rate (A) | Book Value (Refer note) (in $) (B) | Depreciation expense (in $) |
2014 | 0.40 | 47,000 | 18,800 |
2015 | 0.40 | 28,200 | 11,280 |
2016 | 0.40 | 16,920 | 6,768 |
2017 | 0.40 | 10,152 | 3,152 |
2018 | 0.40 | 7,000 | 0 |
Table (1)
Note:
Book value:
The amount of acquisition cost of less accumulated depreciation as on a particular date is referred to as book value.
Accumulated depreciation:
The total amount of depreciation expense deducted, from the time asset acquired till date, as reported in the account as on a particular date, is referred to as accumulated depreciation.
Determine the depreciation rate applied each year.
Useful life = 5 years
Compute depreciation expense on 2017:
Hence, the depreciation expenses for each of the five years, using double-declining-balance depreciation are $18,800, $11,280, $6,768, $3,152 and $0 respectively.
b.
Compute the depreciation expense for each of the five years, using units-of-production depreciation.
b.

Explanation of Solution
Units-of-production method:
Under this method of depreciation, the depreciation expense is calculated on the basis of units produced in a year. This method is suitable when a company has fluctuating productive rate.
Compute the depreciation expense for each of the five years, using units-of-production depreciation:
Date | Depreciation per unit (A) | Number of copies (B) | Depreciation expense (in $) |
2014 | $0.02 | 560,000 | 11,200 |
2015 | $0.02 | 490,000 | 9,800 |
2016 | $0.02 | 430,000 | 8,600 |
2017 | $0.02 | 350,000 | 7,000 |
2018 | $0.02 | 210,000 | 3,400 |
Table (2)
Compute depreciation per unit:
Compute depreciation expense on 2018:
Hence, the depreciation expenses for each of the five years, using units-of-production depreciation are $11,200, $9,800, $8,600,$7,000 and $3,400 respectively.
c.
Calculate the gain or loss from the sale of the asset under each of the depreciation methods.
c.

Explanation of Solution
A schedule to calculate the gain or loss on the sale of the copier under double-declining balance depreciation is as follows:
Particulars | $ | $ |
Consideration received | 7,600 | |
Less: Book value: | ||
Cost of the copier | 47,000 | |
Accumulated depreciation | (40,000) | (7,000) |
Gain on sale of copier | $ 600 |
Table (3)
A schedule to calculate the gain or loss on the sale of the copier under units-of-production depreciation is as follows:
Particulars | $ | $ |
Consideration received | 7,600 | |
Less: Book value: | ||
Cost of the copier | 47,000 | |
Accumulated depreciation | (40,000) | (7,000) |
Gain on sale of copier | $ 600 |
Table (4)
Working Note 1: Calculate the accumulated depreciation under double-declining-balance depreciation.
Working Note 2: Calculate the accumulated depreciation under units-of-production depreciation.
Hence, the gain from the sale of the asset under double-declining-balance depreciation and units-of-production depreciation are the same amount of $600.
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